An assessment company is a type of insurer that may require additional policyholder calls if the initial premium income is not enough.
Insurance mechanics
The additional charge is usually distributed by predefined formulas and used to cover:
- higher-than-expected loss frequency,
- unusually high expenses, or
- adverse reserve movements.
Claims and policyholder impact
This model creates shared downside with policyholders and is therefore typically transparent in the terms of membership and maximum obligations.
Example
A cooperative workplace property pool may run a year with claims above priced assumptions. The excess is then apportioned among members through a second assessment.